A notice advertising deposit interest rates hangs outside a financial institution in Seoul on June 19, as savings banks raise deposit rates amid a continuing shift of funds into the domestic stock market. [Herald DB]
A notice advertising deposit interest rates hangs outside a financial institution in Seoul on June 19, as savings banks raise deposit rates amid a continuing shift of funds into the domestic stock market. [Herald DB]

Savings banks are moving to defend their deposit base against fund outflows driven by commercial bank rate hikes and a buoyant stock market, pushing the average interest rate on savings bank fixed deposits close to 4 percent per year.

According to product disclosures on the Korea Federation of Savings Banks' consumer portal Tuesday, the average rate on one-year fixed deposits across 79 savings banks nationwide stood at 3.90 percent per annum — up 0.11 percentage points from the end of last month's 3.79 percent in just one week. Savings bank deposit rates had fallen as low as 2.69 percent last November before rebounding in December and climbing steadily since.

The number of fixed deposit products offering rates above 4 percent jumped as a result. A total of 152 products now carry rates at or above 4 percent annually, up 47 from 105 a week earlier. The highest rates currently available are on HB Savings Bank's "e-Rotating Fixed Deposit" and "Smart Rotating Fixed Deposit," both offering a base rate of 4.63 percent per annum.

Some savings banks are aggressively courting customers with limited-time special products. Seram Savings Bank recently launched two offerings — a 10-month "TenTen Plus Fixed Deposit" and a 20-month "TenTen Double Fixed Deposit" — both paying 4.5 percent per annum (before tax) until their respective limits are reached, with gift giveaways and prize draws running alongside.

Competition is also intensifying over retirement pension fixed deposit rates targeting corporate and individual retirement funds. Welcome Savings Bank recently raised the rate on its one-year products for defined-contribution (DC) plans and individual and corporate retirement pension (IRP) accounts to 4.82 percent per annum. Retirement pension fixed deposits typically offer rates 0.1 to 0.2 percentage points higher than standard fixed deposits.

The drive to raise deposit rates is a strategy to gain an edge over first-tier commercial banks. As the stock market rally drew funds toward equities, commercial banks had already lifted their fixed deposit rates into the mid-3 percent range to shore up liquidity.

"As customer deposits have become more mobile due to the stock market's influence, the aim is to enhance the appeal of our deposit rates — both to defend existing deposits and to attract new funds," an official at one savings bank said.


won@heraldcorp.com